In addition to PLS and SSI, Avon said that its original restructuring program announced in November 2005 is on track to deliver in excess of $300 million of annualized savings upon full implementation. This original program is still estimated to cost $500 million in total to implement, of which the company has incurred $285 million to date.
The company said that it will use the savings and benefits from its restructuring, PLS and SSI initiatives to fund increased investments in both its brand and channel. Avon said that it expects to increase advertising by 35% in 2007, to approximately $340 million. This projected increase comes on top of an 83% increase in 2006.
Avon reiterated that revenue growth should average mid-single digits over the long term. Reflecting continued investments in both brand and channel, as well as the costs of restructuring and PLS, the company said that operating margin recovery would take a year longer than initially planned. While operating margin should expand in 2007 from 2006's level of 8.7%, it is expected to be close to 2005's level of 14.1% in 2008.
"We are making the right investments for this business at this important juncture to set the stage for enhanced profitability in the future," said Ms. Jung. "We are managing the business for the long-term and investing to strengthen the foundation and restore sustainable growth."